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Ask managers today how they define their workforce, and a common answer is, “That’s a very good question.” It’s a good question, managers tell us, because they feel often squeezed between two realities. One reality is that their workforce increasingly depends on external workers. The other reality is that their management practices, systems, and processes are designed for internal employees. The struggle to reconcile these two realities is an ongoing challenge, with significant implications for strategy, leadership, organizational culture, and workforce management practices.
Our research makes clear that most managers today consider employees and other workers who create value for the enterprise — including contractors, service providers, gig workers, and even software bots — to be part of their workforce. Our recent global executive survey affirms that the vast majority — about 87% — of respondents include some external workers when considering their workforce composition.
At the same time, most workforce-related practices, systems, and processes focus on employees, not external workers. Workforce planning, talent acquisition, performance management, and compensation policies, for example, all tend to focus on full-time (and sometimes part-time) employees. Consequently, organizations often lack an integrated approach to managing a workforce in which external workers play a large role.
As one of the executives we interviewed for this report told us, “Wouldn’t it make sense to become just as mature about managing this segment of the workforce, which can be even bigger than your payroll workers?”
The search for an integrated approach to strategically managing a diverse group of internal and external workers has led some forward-thinking executives to the idea of a workforce ecosystem.
We define a workforce ecosystem as a structure focused on value creation for an organization that consists of complementarities and interdependencies.1 This structure encompasses actors, from within the organization and beyond, working to pursue both individual and collective goals.
This promising idea — which we discuss in detail in this report — offers several potential benefits that could help managers think through the strategic, organizational, regulatory, and practical implications of a workforce comprising employees, external workers, and others.
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1. For a comprehensive overview of the ecosystem construct in management research, see R. Kapoor, “Ecosystems: Broadening the Locus of Value Creation,” Journal of Organization Design 7, no. 12 (2018): 1-16.
2. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a U.K. private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the U.S. member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States, and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.
3. See last year’s report for more information: M. Schrage, J. Schwartz, D. Kiron, et al., “Opportunity Marketplaces: Aligning Workforce Investment and Value Creation in the Digital Enterprise,” MIT Sloan Management Review and Deloitte, April 28, 2020, https://sloanreview.mit.edu.
4. The trend toward workforce ecosystems may have accelerated during the pandemic, given the higher rates of remote work, upheavals in labor markets, the changing nature of work, and shifting worker preferences. However, the extent to which these trends may continue to accelerate, maintain their trajectories, or revert to previous conditions as the extreme conditions of the pandemic subside remains to be seen.
5. For a comprehensive overview of the ecosystem construct in management research, see Kapoor, “Ecosystems.“
6. J.D. Arnold, C.H. Van Iddekinge, M.C. Campion, et al., “Welcome Back? Job Performance and Turnover of Boomerang Employees Compared to Internal and External Hires,” Journal of Management, July 16, 2020, https://journals.sagepub.com.
7. S. Mansoor, “‘I’ve Been Missing Caring for People.’ Thousands of Retired Health Care Workers Are Volunteering to Help Areas Overwhelmed by Coronavirus,” Time, March 26, 2020, https://time.com.
8. J.B. Fuller, M. Raman, J. Palano, et al., “Building the On-Demand Workforce,” (Boston: Harvard Business School and BCG Henderson Institute, November 2020), www.hbs.edu.
9. J. Schwartz, “Work Disrupted: Opportunity, Resilience, and Growth in the Accelerated Future of Work” (Hoboken, New Jersey: John Wiley & Sons, 2021).
10. See, for example, P. Choudhury, “Our Work-From-Anywhere Future,” Harvard Business Review 98, no. 6 (November-December 2020): 58-66.
11. L. Gratton and A. Scott, “The Corporate Implications of Longer Lives,” MIT Sloan Management Review 58, no. 3 (spring 2017): 63-70.
12. In some cases, technologies themselves become key ecosystem members. Today, information processing, storage, and communication costs are so low that they are essentially no longer constraints. Organizations can easily build or contract for systems that allow workers to engage with external communities for novel innovations; connect efficiently with managers; coordinate with one another; access organizational data, services, and processes; and provide other critical functionality. Meanwhile, individuals can access advanced processing systems, use video communication technologies, and store terabytes of data for nominal fees all from their homes or local coffee shops.
13. “The Online Labour Index,“ University of Oxford, accessed Feb. 21, 2021, https://ilabour.oii.ox.ac.uk.
14. In its simplest form, complementarities relate to two or more products or services created by independent actors that enhance the value of each other’s offerings. Hot dogs and hot dog buns are a classic example. Together they provide more value to a customer. In ecosystems, participants of various types each accomplish their own work that together delivers value for a customer. For further treatment of this topic, see D.B. Yoffie, and M. Kwak, “With Friends Like These: The Art of Managing Complementors,“ Harvard Business Review 84 (September 2006): 88-98.
15. For a perspective on these topics, see D. Weil, “The Fissured Workplace: Why Work Became so Bad for so Many and What Can Be Done to Improve It” (Cambridge, Massachusetts: Harvard University Press, 2014).